The Housing Bubble Bloghttp://housingbubble.blog
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.Fri, 22 Feb 2019 02:47:57 +0000en-UShourly1https://wordpress.org/?v=5.0.3The Current Conditions Have Come As A Shock To Many Who Are Hoping To Make Money Off Their Investmentshttp://housingbubble.blog/?p=1073
http://housingbubble.blog/?p=1073#view_commentsFri, 22 Feb 2019 02:47:55 +0000http://housingbubble.blog/?p=1073A report from Reuters on Australia. “As property prices rocketed toward the heady peak of Sydney’s real-estate boom in 2017, the bulldozers came to Epping. But prices are now in freefall, and the suburb is being refashioned once more, this time into the epicentre of a bust. As buyers disappear and miss settlement payments, some projects are sinking under their debts.”

“‘Once the sales rates and pricing dropped, it just couldn’t service all of its commitments,’ said Philip Campbell-Wilson, who is liquidating one such new development, Gondon’s Elysee Epping. Now 61 of Gondon’s 130 apartments are for sale all bundled together to recoup creditors’ funds, pushing prices in the area lower still.”

“Prices in the Epping area have already fallen more than a fifth from their peak in August 2017, according to Corelogic, the steepest falls in Sydney.”

“Australia’s house price falls are not entirely unwelcome and have been partly engineered by authorities to improve affordability. Epping prices, for example, doubled in the eight years leading to the 2017 peak.”

“Realtor Oliver Yap said an apartment nearby that fetched A$562,000 a year ago had taken months to attract a A$415,000 offer. Rents have also sagged. ‘We don’t think this year will be good, there’s no reason for it to be good,’ Yap said. ‘There is a huge oversupply of apartments.'”

From News.com.au. “House prices in Sydney and Melbourne could fall by up to 25 per cent this year alone and ‘there’s a chance they could fall by half’ in the coming “property bloodbath,’ an economist has warned.”

“LF Economics founder Lindsay David, who has been warning of the looming property crash for the past five years, said in a report today the recent house price falls were just the beginning. Mr David said the downturn signalled the end of the ‘Ponzi finance model.’ ‘People have to understand that there are simply too many investors already tied up in the housing market and they can’t go and buy more real estate unless the value of their home rises,’ he said.”

“‘That’s how everyone was able to accumulate so many properties in such a short time. They bought a $500,000 investment property, 12 months later it’s worth $600,000, with that $100,000 equity you’re able to go and buy another $500,000 property. You can’t do that anymore, it’s in reverse.'”

The Daily Telegraph. “Continued oversupply of apartments has pushed Sydney’s rental vacancy rates up for the fifth consecutive month to nearly 4 per cent. Figures showed Sydney had a 3.7 per cent vacancy rate over the January period — the highest level recorded in recent years. This figure is well up from the 2.3 per cent vacancy rate a year ago.”

“The surge in listings was largely driven by an increase in housing stock across Sydney’s middle ring suburbs, which include areas like Auburn, Bankstown and Parramatta. Inner ring areas such as the eastern suburbs, lower north shore and inner west recorded a 3.2 per cent vacancy rate, well up from 1.8 per cent 12 months ago.”

“REINSW president Leanne Pilkington said landlords in Sydney’s western suburbs were feeling the brunt of the increases. ‘All the developments that Sydney has seen in recent years are all finishing at the same time, especially in the west and north west of Sydney, and this is leading to a lot of vacant stock,’ she said.”

“The increase in vacancy rates is leaving many landlords with no choice but to drop their asking price — including Hollywood star Rebel Wilson. She has had to drop her asking rental price twice on her recently settled Gladesville investment apartment, and is still yet to find a tenant.”

“Ms Pilkington said landlords needed to be realistic on price as the market has come back. ‘They need to understand that tenants aren’t prepared to pay any more than what they have to,’ she said. She said the current conditions have come as a shock to many landlords who are hoping to make money off their investments.”

“‘As a landlord you expect to see rent go up, not the other way, which is a big shock for some,’ she said.”

]]>http://housingbubble.blog/?feed=rss2&p=107324More Evidence The Once Torrid Market Is Slowing Down And Increasingly Favors Buyershttp://housingbubble.blog/?p=1070
http://housingbubble.blog/?p=1070#view_commentsThu, 21 Feb 2019 19:26:13 +0000http://housingbubble.blog/?p=1070A report from the Wall Street Journal. “Sales of previously owned homes fell in January, although a decline in home prices and mortgage rates could bode well for a pickup this spring. January marked the third consecutive month of declining sales, and last month’s 4.94 million home sales were the lowest since November 2015. Compared with a year earlier, sales in January declined 8.5%.”

“Inventories of existing homes for sale rose 3.9% to 1.59 million in January. At 3.9 months’ worth of supply, inventories were up slightly from 3.7 months in December, the realtors’ group said.”

The Tampa Bay Times in Florida. “Tampa Bay’s housing market began the New Year with more of a whimper than a bang as homes sales plunged in Pinellas County. The January figures, released today by Florida Realtors, provide more evidence that the once torrid market is slowing down and increasingly favors buyers. And the local results mirrored those statewide and nationally.”

“Pinellas took the worst hit as sales of single family homes plummeted 13.6 percent compared to the same period a year earlier. For the entire month, there were just 685 sales, the smallest number since early 2015.”

The Dallas Morning News in Texas. “Nationwide home inventories have increased in four of the last five months after 44 months of straight declines, according to Zillow. The biggest gains in listings were in high-priced west coast market, including San Jose, Calif. (42.9 percent), Seattle (36.9 percent) and San Diego (31.9 percent.)”

“Houses up for sale in Dallas County rose more than 43 percent in January compared with a year earlier. And listings 42 percent higher in Denton County and were 37 percent higher than a year ago in Collin County, according to the MetroTex Association of Realtors. January’s listing total for North Texas in the real estate agents’ multiple listing service was the highest in six years.”

“Danielle Hale the chief economist with Realtor.com said at the housing industry’s annual meeting this week in Las Vegas that home inventories across the country started to swell in the fall. ‘That’s huge news. The market was really really starved for inventory,’ she said. ‘In spite of the fact inventory is coming back it will be difficult to see sales growth.'”

From Mansion Global on California. “A century-old Gothic Tudor estate once owned by actor Nicolas Cage has come back on the market in San Francisco at an asking price of $10.95 million, a $1 million price cut from its most recent listing two years ago. The actor first bought the home in 2006, and sold it in 2008 for $7.7 million amid financial troubles.”

From Patch Seattle on Washington. “If you’re a mansion-buyer on the hunt for a serious discount, check out 724 14th Avenue East on Capitol Hill. The 10,400 square-foot mansion built in 1905 has been on the market for two years now, and the price has been cut from $8 million down to $4.7 million.”

“The listing agent for the property calls it an ‘incredible opportunity for a savvy buyer.’While that might be true, you still have to be filthy rich to afford to live here. Property taxes will run about $40,000 in 2019.”

]]>http://housingbubble.blog/?feed=rss2&p=107039Is It Possible That Investments Might Go Into Alarm Mode?http://housingbubble.blog/?p=1067
http://housingbubble.blog/?p=1067#view_commentsThu, 21 Feb 2019 15:21:41 +0000http://housingbubble.blog/?p=1067A report from the Buffalo News in New York. “Rochester developer Robert C. Morgan’s problems in Buffalo just got worse. The special loan servicer handling the $27.8 million commercial mortgage on the Raintree Island Apartments in the City of Tonawanda this week declared the loan in default. The firm cited ‘false or misleading’ financial statements, claims or other documents that Morgan’s company provided to justify the original loan, according to a letter obtained by The Buffalo News.”

“Federal indictments last May charged four people with fraud related to mortgages on apartment properties owned by Morgan businesses.”

“The default notice is the latest sign of trouble for Morgan, an investor and developer who has built a multifamily real estate empire over the last two decades through aggressive buying and selling of properties from his suburban Rochester base. He owns and operates more than 36,000 apartments in 14 states through his Morgan Communities and Morgan Management. His techniques and rapid growth drew the attention of the FBI and U.S. Attorney’s Office in Buffalo, which have been investigating Morgan businesses for more than two years.”

The Wall Street Journal on New York. “There may be nobody who lost more from Amazon’s pull out of Queens than the real-estate investors at Savanna. It approached lenders to borrow $750 million against the value of the 53-story tower, which Savanna believed would more than double in worth after landing its famous new tenant, according to people familiar with the matter.”

“Amazon’s plan for a second headquarters in Long Island City sparked a real-estate frenzy, with investors bidding up condo prices immediately. Commercial property owners saw a sharp rise—and then fall—in the interest in their buildings with Amazon’s commitment and subsequent reversal. But few investors experienced as dramatic a swing in fortune as Savanna did.”

“Savanna gambled on Long Island City when it bought One Court Square in 2014, betting that the decades-long shift from an industrial neighborhood to a more 24-hour mix of office workers and residents would finally take hold. ‘It is going to be hard to get a large commercial real-estate loan on a property that is 70% vacant,’ said Joe McBride, a director at Trepp, which tracks commercial mortgage-backed securities.”

The Dallas Morning News in Texas. “Dallas-Fort Worth is the top apartment building market in the country. So the outlook for the multifamily construction sector should be of interest to builders who are now constructing more than 35,000 North Texas apartments.”

“At its annual conference this week in Las Vegas, the National Association of Home Builders is forecasting that nationwide starts of apartments and other multifamily units will decline slightly this year and rebound by only a hair in 2020. ‘In 2019 and 2020, we are pretty confident with the forecast we have with flat conditions,’ said Danushka Nanayakkara of the association’s forecasting and analysis department.”

“She said construction has caught up with demand in most U.S. markets, but so far there is not a glut of new apartments on the market. Richardson-based RealPage — the apartment industry service provider — also sees a leveling in apartment building activity.”

“Product already on the way points to a steady flow of apartment deliveries in the immediate future,’ said RealPage chief economist Greg Willett. ‘Nationally, completions should remain near 300,000 market-rate units annually in 2019 and 2020.'”

“‘There’s been no pullback in apartment development capital availability to date, and construction won’t slow in a big way until money sources scale back on investment activity,’ he said.”

From Bisnow on Texas. “For now, the Metroplex suffers an overhang of senior housing supply, according to the speakers at Bisnow’s DFW Senior Housing event. Dallas-Fort Worth senior housing has an occupancy rate of about 84%, a little below the national average. Supply has grown in recent years, just like at the national level. ‘Part of the reason for strong inventory growth was interest among investors after the recession, especially for assisted living, because it held up better during the recession,’ said National Investment Center for Seniors Housing & Care Chief Economist Beth Mace.”

“‘If supply can slow down, demand will catch up to it, and occupancy rates will tick upward,’ both nationally and locally, Mace said. ‘It can happen. In San Antonio, for instance, at its recent peak there was about 25% of inventory under construction. As a result, supply wildly outraced demand, and so construction slowed down a lot. Now occupancy there is edging upward again.'”

“The speakers pointed out that a recession is coming. Is senior living really recession-proof? The short answer is no, but the right properties can be recession-resistant.”

The Naples Daily News in Florida. “I have a few comments regarding the recent County Commission meeting involving the ‘need’ for rental affordable housing. I’ve been doing my homework, checking the facts, and then driving around to make sure I see it with my own eyes.”

“It seemed everywhere I drove, I saw for rent signs, and this is SEASON! If we can’t rent them in season, how accurate is the needs assessment? Where is the crisis?”

“I checked the rental apartment inventory list provided by the affordable housing department, which also included ‘rental apartments in process’ and found that right this minute there are 4,019 apartments in some stage of construction. This doesn’t count smaller apartment complexes, condo rentals converted from condo living to investment, homes for rent, etc. And these don’t even count the three Habitat villages being built at this moment in East Naples.”

“What will happen if the economy slows down? Many new rentals have been started because of the perceived crisis. If very little renting takes place in the summer, is it possible that investments might go into alarm mode? And now the commissioners have approved even more density for affordable rental housing! I explained this to them. No one listened. Keep watch. I foresee problems ahead.”

]]>http://housingbubble.blog/?feed=rss2&p=106760This Is A Way Of The Seller And Their Team Coming Back To Realityhttp://housingbubble.blog/?p=1062
http://housingbubble.blog/?p=1062#view_commentsWed, 20 Feb 2019 23:38:48 +0000http://housingbubble.blog/?p=1062A report from the California used house salespeople. “Housing demand in California remained subdued for the ninth consecutive month in January as economic and market uncertainties sent home sales to their lowest level since April 2008, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. January marked the ninth consecutive month of decline and the sixth month in a row that sales were below 400,000.”

“‘While we expected the federal government shutdown during most of January to temporarily interrupt closings because of a delay in loan approvals and income verifications, the impact on January’s home sales was minimal,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘The decline in sales was more indicative of demand side issues and was broad and across all price categories and regions of the state. Moreover, growing inventory over the past few months has not translated into more sales.'”

“Statewide active listings rose for the 10th consecutive month after nearly three straight years of declines, increasing 27 percent from the previous year. All major regions recorded an increase in active listings, with the Bay Area posting the highest increase at 57 percent, followed by Southern California (29.7 percent), Central Valley (19.5 percent) and the Central Coast (14.5 percent).”

From The Signal in California. “Realtors throughout Santa Clarita helped close escrows during 2018 on 2,247 single-family homes and 988 condominiums, both lower totals compared to the prior year, as rising prices limited the pool of qualified buyers even as those buyers who stayed in the market gained added negotiating leverage, the Southland Regional Association of Realtors reported.”

“2019 will see more of the same, but buyers now have way more negotiating power. While still early in the process with the housing shortage still providing sellers an edge, the market is giving buyers some advantages, especially as houses sit longer on the market, inventory grows slightly and more active listings report price reductions.”

“I agree with Tim Johnson, the association’s chief executive officer, that prices have risen so high, so fast that too many prospective buyers were left behind. ‘We’ve hit a point where there may be downward pressure on prices,’ Johnson said, ‘as the market shifts to the middle in an effort to regain buyers who have been priced out.'”

The Orlando Sentinel in Florida. “Shaquille O’Neal has a deal for you on his massive mansion in the exclusive southwest Orange County community of Isleworth. The NBA legend has cut the asking price of the 31,000-square-foot lakeside estate to just $21.9 million.”

“O’Neal put the property at 9927 Giffin Court for sale in May for $28 million. He also hired a new broker, The Agency Collective, who took over for Premier Sotheby’s International Realty. ‘We dropped it from $28 million to $21.9 million to show a significant decrease and to show that he is a serious seller and not just put it up there for vanity,’ said Chris Franciosa, managing partner for the South Florida-based real estate firm.”

“O’Neal bought the home for $3.95 million in November 1993. The home was expanded several times with luxurious upgrades such as a cigar bar and humidor, a 17-car garage and a two-story great room.”

From Arlington Now in Virginia. “‘Why would I care that a property is reduced by $3,000?’ Here are the reasons why you should keep your eye on these reduced properties, whether their prices ticked down by $3,000 or $500,000.”

“These reductions may only be the beginning. A proactive reduction of $3,000 by the seller may eventually segue into a negotiation that saves you thousands more. A reduction may show the seller’s urgency. Each seller’s situation is unique. They may need to sell by a certain date and a price reduction is small hint to get you enticed (and negotiating even further).”

“It may signify a price correction. Yes, some listings are truly overpriced, and this is a way of the seller and their team coming back to reality.”

“As of February 18, there are 116 detached homes, 10 townhouses and 85 condos for sale throughout Arlington County. In total, 10 homes experienced a price reduction in the past week.”

From Curbed Hamptons in New York. “Built in 2009, an 11,000-square-foot mansion in north-of-the-highway Water Mill that’s been on the market since July of 2017 has just cut $2 million from its asking price.”

“When the 6.5-acre property listed for sale, it was asking $12.6 million, but after a year that price fell down to $9.9 million. Earlier this week, the most recent price cut brought the nine-bedroom, 10-bath estate down to $7.9 million under Saunders real estate agent Hans von Schirach. The house last sold in 2013 for $6 million.”

]]>http://housingbubble.blog/?feed=rss2&p=106252A Representation Of What’s Possible, Not What’s Practical, Responsible Or Achievablehttp://housingbubble.blog/?p=1059
http://housingbubble.blog/?p=1059#view_commentsWed, 20 Feb 2019 20:22:58 +0000http://housingbubble.blog/?p=1059A topic starting with part of an email I received this morning. “Ben, I’m just another good hard working young man in the oilfield and I’m desperate to escape worthless crooked landlords. I NEED a home for me and my wife and the kids I’d like to have. I leave houses cleaner than when I move in, pay rent early like clockwork, with no damage etc and I now understand why people trash rent houses. All my dignity has been repeatedly spit on.”

“I moved to the South Dakota…and housing is nuts here too. All a realtor is useful for is asking if you’re pre-approved for your ‘death pledge’ mortgage. Mention price and all communication ceases if the conversation made it that far. Old homes are sitting on the market for up to a year way over loan value even after ‘reductions’ in SD and back in Oklahoma. I’m at my wits end. I went to private school and have 750 FICO and some minor savings, gold/silver, but I’m not stupid. When does this SHIT END?”

“I’m applying for overseas jobs and maybe I can move to a tax haven. I’m done. I guess my point is I need some hope or advice or maybe just wanted to inform a good blogger just how the few good remaining people feel about American’s ‘future’. I wrote this after seeing an old house advertised for $100k that rents for $600 month to month in a remote town. I blew a fuse.”

The Palo Alto Daily Post in California. “Of the seven members of Palo Alto City Council, no one seems to attract quite as much Twitter backlash as the slow-growth Councilwoman Lydia Kou. Kou, a Residentialist and real estate agent, is frequently criticized by Yes In My Backyard (YIMBY) pro-housing advocates online for opposing the development of dense housing in town.”

“Some have taken to tweets to accuse her of profiting off of Palo Alto’s housing crisis by blocking the approval of new apartments, condominiums and townhouses in order to maintain multimillion-dollar property values, the reasoning goes.”

“On Thursday night, Kou inflamed housing advocates when she posted a quote calling the YIMBY movement a ‘pro-density lobby in California (that) favors density in part because it promotes ‘collectivism’ — reminiscent of the urban planning orthodoxy in the late, great Soviet Union.’ The quote is from the article ‘Restoring the California Dream, Not Nailing Its Coffin’ by urban studies scholars Joel Kotkin and Wendell Cox on. They say the housing shortage is caused by state regulations restricting urban sprawl, not local resistance to apartment buildings.”

“Vice Mayor Adrian Fine, council’s staunchest development advocate, said Kou’s tweets were ‘out there.’ Fine said that one of Kou’s most telling tweets appeared in April 2017, when she posted a San Francisco Business Journal article stating that San Francisco had doubled its supply of new condominiums.”

“‘There’s plenty of housing, you just need a superb Realtor, like me,’ Kou wrote.”

From Green Builder Media. “On the eve of Design & Construction Week, Green Builder Media Founder Ron Jones says: If NAHB wants to claim the noble title of champion of the home building industry and protector of the American dream, it needs to showcase homes people can actually afford.”

“Hardly a week goes by when I don’t receive multiple communications from the National Association of Home Builders (NAHB) beating the drum for housing affordability and blaming any lack of same on a revolving list of outside forces, namely; regulations, safety and performance requirements, the scarcity of buildable lots, escalating costs of materials and labor, tightened lending rules, unfavorable interest rates, and housing policy in general.”

“NAHB does a masterful job of manipulating its messaging to simultaneously position itself as the leading advocate for the homebuying public and as an indispensable ally protecting its industry members. In doing so, the organization seeks not only to claim the loftiest pinnacles of industry knowledge, but also the moral high ground associated with home ownership.”

“So, this brings me to the glaring contradiction that NAHB rolls out at the beginning of each new year through their official demonstration house, proudly called The New American Home (TNAH). In this cycle it takes the form of a spectacular show home in the foothills outside Las Vegas that embodies brilliant design, cutting edge technologies, all the imaginable bells and whistles, premium products and systems, impeccable workmanship, and, oh by the way, something a little north of 9,000 square feet worth of the American dream.”

“We are not talking about an exception here, NAHB’s poster child for the epitome of American residential aspiration is almost always enormous in its proportions, bearing little resemblance to a dwelling that any regular working family could harbor hopes of owning. In this case, we could fit almost four of those typical new homes into TNAH 2019.”

“I have called out NAHB on multiple past occasions regarding the scale of these projects and the message being conveyed, but their justification is that TNAH is a representation of what’s possible, not what’s practical, responsible or achievable.”

The Idaho Statesman. “Not long ago, a million-dollar home sale was a big deal in Boise. Not anymore. Last year, 95 homes priced at more than $1 million sold in Ada County, said Troy Owens, an agent with Group One Sotheby’s International Realty.

“Back in 2010, only one Ada County home sold for more than $1 million. There were 17 in 2014, 25 in 2015, 38 in 2016 and 53 in 2017. Sixty-eight homes were on the market one February day in Ada County with asking prices of $1 million or more, including 15 for more than $2 million. Forty-five of them were built since 2000.”

“‘With our airport, you can have a home here and raise your kids here and work in the Bay Area of California for four or five days and fly back here pretty easily,’ Owens said.”

“One of agent Ron McDonough’s listings, a $2.3 million home with 7,503 square feet, six bedrooms and eight bathrooms at 2200 N. Ballantyne Lane in Eagle, has been on the market since July. ‘You don’t sell these homes in a day,’ McDonough said. ‘You sell them within three to nine months.'”

“Sometimes even that’s not enough time. A medieval-style castle on Warm Springs Avenue has been on the market since July 2016. With five bedrooms, an elevator, a hot tub and a suit of armor, the house was originally listed for $3.4 million. The price was knocked down several times and is now $2.5 million.”

]]>http://housingbubble.blog/?feed=rss2&p=105927They Know It’s Been A Buyer’s Market, So They Think They Can Demand Anythinghttp://housingbubble.blog/?p=1056
http://housingbubble.blog/?p=1056#view_commentsWed, 20 Feb 2019 15:23:55 +0000http://housingbubble.blog/?p=1056A report from KGW 8 on Oregon. “For the first time in seven years Portland home prices have gone down, according to new numbers from Regional Multiple Listing Service. The apartment building boom has left many units vacant across the metro area. Now, owners are giving incentives for people to move in. We’ve seen landlords offering free rent for three months, free parking spots, free furniture.”

“In the case of the TwentyTwenty building, developer Patrick Kessi of PHK Development says the market’s cooled so much, he’s offering up to a $100,000 price cut to get these sold over the next few weeks. ‘So the flash sale is 15-20 percent off, and it’s on a select 10 homes. So, the starting price is in the 200-thousands for a one-bedroom urban apartment, which is a great price. And it’s discounted into the $500,000 for a two-bedroom, two-bathroom condo,’ Kessi told KGW.”

“Portland’s biggest influx are still Californians. Many tech companies are creating small hubs here, and Portland is a short plane ride away. But many of them are coming up with families and want to buy a house, not an apartment. Real estate professor Gerard Mildner says we need to expand the urban growth boundary in the suburbs to get enough land for new homes.”

“‘The Californians are coming, the question is do we accommodate them or not? If we don’t build the subdivisions they’re looking for, then they’ll heat up the markets in the inner city like they have been doing for the last 10 years,’ Mildner said. ‘We’re living in a constrained world and constrained supply. We’ve got urban reserves, we should bring those out given the housing emergency.'”

“Mildner says home prices will keep going up for the next several decades.”

The Dallas Morning News. “All of the economists who are meeting with builders from around the country this week say they see growing signs of a recession — but probably not this year.”

“‘In June, this will be the longest expansion in U.S. history,’ said David Berson, chief economist with Nationwide Mutual Insurance. ‘We think it will last considerably longer as well. Although the risks of the expansion ending have gone up.'”

“‘There are lots of concerns that are bubbling up right now,’ Berson said. ‘The expansion won’t go on forever. Once the recession hits — as with all recessions — there will be a hit for housing demand.'”

“Unlike in previous economic cycles, there’s no glut in the new-home market. ‘There has been no overbuilding, at least on a national basis,’ Berson said. ‘Even regionally there is no evidence of overbuilding.'”

The Los Feliz Ledger in California. “After two previous campaign finance reform motions by Los Angeles City Councilmember David Ryu fizzled, a third may succeed, as the Los Angeles City Ethics Commission voted today to ban donations to political candidates and officeholders from all non-individuals and from real estate developers and their associates.”

“Today’s hearing and votes–all unanimous from the 4-person board–come amid an FBI corruption probe of city hall and multiple media reports alleging city officials may have traded political favors for donations–either to the officials themselves, or to charitable causes they support.”

“A speaker said the city’s current crises, a lack of affordable housing, epidemic homelessness and perceived corruption by local officials are inter-related. At the same time, the speaker said, ‘we have a luxury housing glut.'”

From Crain’s Chicago Business in Illinois. “If you’re buying a home this year, you’ll have less time to nitpick about its out-of-date looks than you used to, thanks to revisions in the contract for Chicago-area home sales.”

“Prompted by a spate of buyers and real estate lawyers who were misusing the time allotted for negotiating over flaws that a home inspector finds—the time to ask for roof repairs, boiler replacements and other substantial repairs—the contract revisions clarify that after the inspection is not the time to request that old wallpaper be replaced or moldy window treatments cleaned.”

“The aim of the changes was not to take away buyers’ opportunity to have the seller make cosmetic changes, but to clarify that there’s a time for that: when submitting an offer on the property, say two people who were on the committee of about two dozen who revised the Multi-Board Residential Real Estate Contract. The contract has been rolling out in recent weeks and becomes the standard March 1.”

“In the past few years, ‘buyers have gotten a little out of hand asking for cosmetic changes,’ said Lynn Madison, a real estate trainer and past president of the suburban Mainstreet Organization of Realtors. ‘They’re watching all these HGTV shows, and they think the house has to look perfect.'”

“‘They know it’s been a buyer’s market, hard to get a home sold,’ she said, ‘so they think they can demand anything. And if they’re millennials, a lot of them have so much debt that they can’t afford to spend more on repairs, so they ask the seller to do it.'”

“Along with millennials who are overloaded with student loans, move-up buyers may have such a small cashout from their old address that they, too, have little to spend after the purchase.”

From Mansion Global. “‘Things are looking good for buyers in 2019,’ Redfin chief economist Daryl Fairweather said in the report. ‘The supply of homes for sale is increasing faster than it has in nearly four years.'”

“Despite a national increase in home prices, 10 of the 81 metro areas Redfin tracks suffered a decline, including Portland, Oregon, down 1.3%, and San Francisco, down 5%. Neither of these cities have faced a significant price drop since 2012, and both experienced consistent growth throughout most of last year.”

“‘We predicted price growth would slow down and that prices would drop in coastal cities like San Francisco and Seattle, but we didn’t know how sellers would react to a cooler market,’ Mr. Fairweather said. ‘It’s encouraging to see that listings are up—it means that sellers aren’t taking the ball and going home.'”

“San Francisco’s median sale price dropped to $1.235 million from $1.3 million, but just under half of its homes sold above list price. The number of houses sold remained down for the sixth consecutive month, falling in 57 of Redfin’s 81 metro areas and 7.6% nationally from January 2018.”

“This decline in sales is reflected in several of the U.S.’ larger metropolitan areas. Year over year, Philadelphia fell 34.3%, West Palm Beach, Florida, fell 26.2%, Chicago dropped 25.5% and Los Angeles was down 16.4%. The biggest growth in inventory occurred in Seattle, with a 109.1% annual increase, and San Jose, California, which rose 100.8%.”

]]>http://housingbubble.blog/?feed=rss2&p=105656Signs Sellers, Developers And Buyers Are Grappling With The Real Value Of Housinghttp://housingbubble.blog/?p=1053
http://housingbubble.blog/?p=1053#view_commentsWed, 20 Feb 2019 01:54:26 +0000http://housingbubble.blog/?p=1053Two reports from the Australian Financial Review. “It is every homebuyer’s dream to be mortgage-free and Sydney developer Allam Property Group is making that possible for some – for twelve months. It will pay a whole year of mortgage for new homebuyers at 80 per cent of purchase price at its Sydney housing estates such as Box Hill, Chisholm, Marsden Park and Schofields.”

“‘In today’s market we think this is important, smaller offers or offers of free up-grades or furniture simply do not have the cut-through in today’s incentive driven market,’ founder Barney Allam said.”

“While incentives are not unusual, in recent times there has been a much bigger push on rebates on stamp duty, utility packages, rental guarantees, and free cars and television sets, particularly in the two biggest and most vulnerable markets Sydney and Melbourne, to lure more buyers in a firmly slower market.”

“The cuts in rents and rising incentives are signs sellers, developers and buyers are all grappling with the real value of housing. ‘These are signs of a weak and falling market, people just don’t know what the true value is, like catching a falling knife,’ he said. ‘The increase in housing supply is causing a cut in rents … rents are usually used as measure of the value of housing but rents are falling.'”

“The drop out of Chinese buyers from the property market has left a significant hole in one Sydney suburb, causing house prices to plunge by 20 per cent in 2018. Houses in the suburb of Penshurst, 17 kilometres south of Sydney’s CBD, experienced the biggest fall in median price across the city, dropping by 19.7 per cent from $1.32 million to $1.06 million over the 12 months to December – double the 9.9 per cent city-wide fall in prices – according to Domain Group data.”

“‘Penshurst used to benefit from the overflow of Chinese buyers in Hurstville, which is the capital of St George and a major China Town,’ Ray White selling agent Steve Pentland said. ‘We were so heavily reliant on the Chinese market but the demographic of Penshurst has shifted – there are no more Chinese and there’s no money being spent.'”

“The median house price in Lane Cove also dropped significantly over the year by 18.2 per cent to $1.8 million followed by Glebe where values slipped by 17.7 per cent to $1.58 million. The biggest drop in unit prices over the year was in Balmain, in Sydney’s inner west, where the median price fell 16.9 per cent from about $1,275,000 to $1,060,000.”

“Unit prices also fell in other parts of Sydney’s inner west, particularly in areas where there has been an influx of new apartments, including Newtown (-15.3 per cent), Leichhardt (-14 per cent), Summer Hill (-14 per cent) and Erskineville (-12.5 per cent).”

]]>http://housingbubble.blog/?feed=rss2&p=105320We’re Past The Peak, And That’s Goodhttp://housingbubble.blog/?p=1047
http://housingbubble.blog/?p=1047#view_commentsTue, 19 Feb 2019 15:36:31 +0000http://housingbubble.blog/?p=1047A report from the Philadelphia Inquirer in Pennsylvania. “Last year alone, 2,810 new housing units were completed in the area known as Greater Center City — the largest number since 2002, according to a report. The CCD report showed that the market might be slowing. This isn’t necessarily a problem, said Kevin Gillen, senior research fellow at the Lindy Institute for Urban Innovation at Drexel University.”

“‘We’re past the peak, and that’s good,’ he added. ‘You want to take a breather.’ Currently, new construction is outpacing population, and no one wants to see apartments sitting vacant, Gillen said, stressing that this slow-down is ‘a normal cyclical fluctuation, not another housing bubble bursting like 10 years ago.'”

“Contrasting various Metropolitan Statistical Areas, Gillen found that the San Francisco area registered four times the rate of post-recession housing construction as Philadelphia; both Dallas and New York nearly tripled Philadelphia’s rate. What keeps the city from soaring, construction-wise? ‘Poverty,’ Gillen said.”

From SocketSite on California. “Muted by the holiday weekend, the net number of homes on the market in San Francisco (615) was relatively unchanged over the past week but remains 28 percent higher than at the same time last year, 76 percent higher than at the same time in 2015 (350) and a 7-year seasonal high.”

“At the same time, the percentage of listings in San Francisco which have undergone at least one price reduction has ticked up to 16 percent versus 13 percent at the same time last year. And the number of homes in contract to be sold is currently down 17 percent on a year-over-year basis while the average list price per square foot of the homes in contract is running around $930, down 1 percent versus the same time last year.”

From the Tennessee Ledger. “It was a rough start for home sales in Williamson County with a decline in home sales prices and the number of units sold. The were 350 home sales recorded for the month averaging $520,523 compared to 387 sales last January averaging $540,640 resulting in a 10 percent decrease in units sold and a 4 percent decrease in average price.”

“Home sales over $1 million were down 39 percent in January with 17 recorded for the month compared to 28 recorded in January 2018.”

From 6sqft on New York. “The partners behind the Jean Nouvel-designed tower at 53 West 53rd Street (also known as the MoMA Tower) will be serving even more price chops to the ultra-luxury project in the midst of lackluster sales, though they disagree on how much that should be. As Crain’s reported, Hines, Goldman Sachs, and Singapore’s Pontiac Land Group recently underwent an arbitration process to settle the matter, with Hines seeking aggressive discounts.”

“The 1,050-foot condo building has already received $167 million in price cuts since hitting the market almost four years ago with a projection of $2.14 billion in sales. About 15 percent of the 145 units at 53W53 are under contract currently, with closings set to begin in the spring, a spokeswoman for the project said.”

“The poor sales in an oversaturated market reflect CityRealty’s 2018 year-end market report, which revealed a notable drop in transaction volume and a decline in condo sale prices throughout Manhattan’s real estate market. There are now so many competing high-end projects—520 Park Avenue, Central Park Tower, and One57 among them—that buyers don’t feel a sense of urgency.”

“Some have also cited specific issues with 53W53’s design which might be contributing to stalled sales. The structural diagrid on the facade cuts through windows and interferes with the sweeping Manhattan views. As 6sqft previously reported, this also poses a host of pragmatic issues since the windows are rendered inoperable, requiring a special ventilation system and custom window shades.”

“‘In a market where views and light are highly rewarded, you don’t want to interrupt sight lines for any reason,’ Donna Olshan, president of the residential brokerage firm Olshan Realty, said to Crain’s. ‘I commend the developer for wanting to build something so artistic, but I’m not so sure of its market viability.'”

]]>http://housingbubble.blog/?feed=rss2&p=104743If You Pay A Premium, Be Prepared To Hold Onto It For A Long Timehttp://housingbubble.blog/?p=1044
http://housingbubble.blog/?p=1044#view_commentsMon, 18 Feb 2019 22:27:13 +0000http://housingbubble.blog/?p=1044A report from the New York Post. “Don’t believe the brochures. A Billionaire’s Row apartment can be a terrible investment. Roughly 16,000 apartments were bought and resold in New York from 2014 through 2018. Of those, 1,295 homes — 7.7 percent — sold at an outright loss. But a whopping 39 percent of the 66 luxury condos that were bought and resold in Midtown during this time lost money, according to StreetEasy. In fact, across all neighborhoods, the city’s priciest properties saw losses.”

“‘One of the things that I struggle to wrap my head around is why people continue to park money in high-end New York real estate when it’s not a very lucrative asset class,’ said Grant Long, senior economist at StreetEasy. ‘You just have to assume someone like Ken Griffin [who recently dropped a record-breaking $250 million on an apartment at 220 Central Park South] isn’t very interested in seeing his money back. An apartment like that isn’t liquid.'”

“The current correction in the market is ‘driven by sentiment rather than data or some kind of event,’ added Leonard Steinberg of Compass, a residential brokerage. ‘We had market razzmatazz between the years of 2011 and 2016. There was an extraordinary escalation of asset prices and in some cases it was justified and in a lot of cases it wasn’t.'”

“‘Everything about real estate losses or gains is about timing,’ Steinberg said. ‘People say, ‘I thought real estate in Manhattan was a secure, 100 percent bet.’ But if you pay a premium for anything, you better be prepared to hold onto it for a long time.'”

“In March of 2018, an entity controlled by one Mohammed al Saud sold two adjacent units on the 63rd floor of One57 for a total of $44.5 million — after having paid nearly $59.7 million for the apartments in 2014. Paul Adams, the CEO of Monroe Capital, picked up an 1888 town house for $13.7 million in 2017. But he ­unloaded it for just $9.5 million in November.”

“Although Adams did not respond to request for comment regarding the sale, it’s safe to say that he lost by flipping the home in less than a year. Moreover, the luxury town-house market in Manahttan is particularly weak as of late. The median sales price fell 9 percent from 2017 to 2018, according to Douglas Elliman.”

From Mansion Global. “A renovated 42nd-floor apartment on the Upper West Side of Manhattan, has been listed for $21.5 million, down from $30 million when it was first listed in September 2017. The current owners bought the corner unit at Trump International Hotel and Tower in 2013 for $16.25 million and spent $2,500 per square foot—just shy of $12 million—on a three-year renovation, according to the listing agents.”

“The lowered price is a response to the changing marketplace. ‘The market ‘ has adjusted over the last 18 months,’ said listing agent Noble Black of Douglas Elliman. ‘Two years ago it was definitely a stronger market.'”

]]>http://housingbubble.blog/?feed=rss2&p=104437The Myth That You’re Going To Make Money On Your Property Is Just Thathttp://housingbubble.blog/?p=1041
http://housingbubble.blog/?p=1041#view_commentsMon, 18 Feb 2019 15:01:52 +0000http://housingbubble.blog/?p=1041A report from Fortune Magazine. “When Upper East Siders Adelle and Robert Rathe boarded a flight to Saint Martin in mid-January, they left behind a typically cold New York day. By the time they return from their resort getaway in mid-April, the trees in Central Park will have started to bloom.”

“And although they once considered buying property on the Caribbean island they’ve fallen for over the decades, they’ve found something even better to splurge on: about 90 consecutive nights at Belmond La Samanna, a luxury resort that reopened in December after a $25 million renovation.”

“‘A lot of our friends wonder what we pay, Adelle jokes. I tell them they can find out by calling the hotel. (Run math based on the hotel’s starting rate of $545 per night, though, and the pair is likely looking at a deep-five-figure bill—minimum—before adding any food, drinks, or activities.)”

“This twist on the snowbird lifestyle—which trades seasonal vacation homes for no-expenses-spared resort stays—is becoming increasingly popular among the retirement jet set, according to industry insiders.”

“‘Those who choose luxury resorts over real estate purchases such as a condo or home do so not only for the five-star pampering and attentive service, but also the flexibility of choice,’ says Tara Hyland, a travel adviser. ‘Of course, spas, yoga classes, fitness programs, water sports, golf, tennis, and restaurants make resorts even more attractive.'”

“‘Owning a house is a responsibility. The security, the constant work—you’re a slave to it,’ says Adelle, who is retired, speaking from the resort while a polar vortex pummeled her Manhattan home. ‘Here I’m 150 feet from the water, and I can get anything I want in five minutes.'”

“With nightly rates at these properties starting at $200—and often costing upward of $750—snowbirding at a resort year after year can easily cost more than a down payment on a beachside villa. Still, it’s not as financially reckless as it sounds.”

“According to real estate consultant Jonathan Miller, the real estate market is softening in many seasonal-stay destinations, largely due to the advent of services such as Airbnb. And monetizing a vacation home through these services isn’t for everyone. In cases in which properties sit dormant for months, owners can end up wildly out of pocket, particularly when you factor in down-payments, renovations, insurance in hurricane-prone markets, monthly parking or homeowners association dues, taxes, and other costs.”

“‘There’s no way it makes sense to own an apartment unless you’re spending a significant amount of time there,’ adds Miami-based financial advisor Patrick Dwyer about South Florida, largely considered the country’s snowbird mecca. ‘But even then, you’re still losing. The myth that you’re going to make money on your property is just that. Interest rates are going up, which makes the opportunity for your capital investment in real estate more challenging. Being able to go from resort A to resort B is better than locking into a fixed cost as you get older.'”